Sue Gray has quit her role as the Prime Minister's chief of staff, saying she "risked becoming a distraction".
The resignation comes after weeks of speculation about her role and reports of a power struggle in government.
Ms Gray had been caught up in rows over pay, after the BBC's political editor revealed her salary was higher than Sir Keir Starmer's.
A Downing Street spokeswoman confirmed that Ms Gray was taking up a new roles as the prime minister's envoy for nations and regions.
Labour said Ms Gray would be replaced by Morgan McSweeney, who was previously chief adviser to the prime minister and masterminded Labour’s election campaign.
Resigning, Ms Gray said it had been an honour to "play my part in the delivery of a Labour government" as Sir Keir's chief of staff, both in opposition and in No 10.
"However in recent weeks it has become clear to me that intense commentary around my position risked becoming a distraction to the government’s vital work of change," she said.
"It is for that reason I have chosen to stand aside, and I look forward to continuing to support the prime minister in my new role."
Mr Starmer thanked Ms Gray for "all the support she has given me, both in opposition and government and her work to prepare us for government and get us started on our programme of change".
"Sue has played a vital role in strengthening our relations with the regions and nations. I am delighted that she will continue to support that work," he added.